Adding background to the landscape and mixing with mist
The problem is that your clouds should not be in front of the island, but behind!

EDIT: (after messing with this for a while...)
You need one more mix node.
In other words you need one to key the clouds behind the island.
And another one mix node to mix the mist over the island and the background.





I disabled mist again, according with your comment.
The hardest part is controlling how the horizon meets the sky since the mist pass takes care of the island but not of the ocean in the distance, so I added a mask to affect the alpha channel at the horizon line of the render layers node. Then I used that new mask to control the alpha over that mixes the Island and the sky.

The modified file I placed here:
http://www.pasteall.org/blend/28181

It's been a lot of fun playing with your file!